However, a 1.6 percent rise at BP, after the
heavyweight oil major said it would return $8 billion to
shareholders, cushioned equity markets from bigger losses.

Cyprus needs to find 5.8 billion euros ($7.50 billion) in
new money by a Monday deadline if it is to receive an EU bailout
to avert a collapse of its financial system that could push it
out of the euro zone, having earlier rejected a plan to raise
the funds by taxing bank customers' deposits.

Most investors expect an eventual deal to help Cyprus,
leading the majority to believe that any equity market fall in
March and April will be a temporary one before stock markets
resume an upwards trajectory as the year progresses.

A Reuters poll this week forecast that the Euro STOXX 50
index would rise to 2,800 points by the middle of 2013 and would
end the year at 2,935 points.

However, uncertainty over how the Cyprus situation may
unravel - highlighted on Friday by a failure from Cyprus to get
a funding lifeline from Russia - has led investors to sell
shares to book profits on a rally on stocks so far this year.

"I would sell on the rallies. With all this uncertainty over
Cyprus, the markets will be going a touch lower again," said
Berkeley Futures associate director Richard Griffiths.

Griffiths said Germany's DAX, which was down 0.2
percent at 7,916.77 points, could fall to 7,750 points early
next week and added clients were buying "put" options, which are
often used to bet on a future fall in an asset or to protect
against such a move.

BUY VOLATILITY

Banc de Binary senior broker David Knight also said the
Cyprus situation would dent equity markets in the near-term,
even in light of signs that the economy of Germany - the biggest
in Europe - has so far proven to be relatively robust.

"The markets are looking for a correction and Cyprus is
compounding that feeling," he said.

Lee Robinson, founder of asset management firm Altana
Wealth, said a default in Cyprus would send investors seeking
shelter in assets perceived as safe, such as German and U.S.
government bonds .

Robinson has been seeking protection against possible swings
in share prices by buying implied volatility, an index which
moves in the opposite direction to cash equities and is based on
option contracts.

"Volatility to me is a very underpriced asset given the
potential outcomes globally," he said.